Successful M&A: The Difference Between an M&A Integration Playbook and Work Plan/Checklists

By GPMIP Nordic Partner, Michael Holm; Benelux Partner, Christophe Van Gampelaere; and USA Partner, Stefan Hofmeyer

M&A playbooks are becoming more prevalent as a standard when executing mergers and acquisitions, providing significant benefits to serial acquirers. The playbook concept applies both to strategic corporate and private equity (PE) dealmakers.

History

The term ‘playbook’ comes from American football where a team has practiced a number of plays prior to the game. A play is an on the ground “plan of action” or “strategy” used to move the ball down the field.  The quarterback calls the plays during the game in the huddle and the team executes within the next minute. Each play has an easy to remember name – think “Frying pan” or “Off tackle.” American football is a fast-paced game, not unlike life in the world of M&A.

Serial corporate acquirers, mainly in Silicon Valley, took this concept of a playbook into the corporate world as a way to effectively speed up deals, integrations and carve-outs. Previously organizations did not always understand what kind of acquisition they were working on, and started with the wrong scope, objectives and activities (normally from the last M&A project they worked on). M&A plays were given names like “drop and pop” for sales acceleration, that is, a company with a global sales organization buys a target with a locally proven product, and ‘drops’ it into their global sales machine and it ‘pops’ in sales. Another play “iron out” was to use economies of scale to reduce cost. The corporate M&A playbook had a number of M&A plays and scenarios (e.g. a small, medium or large “drop and pop”) documented and rehearsed.  The premise of these early M&A playbooks is still in use today.

Benefits

The benefits of an M&A playbook are:

• Clarity of scope, objectives, key success factors
• Reduced dependency on individuals by documenting their knowledge
• Less waste of time in execution during the different phases of the M&A project
• Faster synergies capturing
• Lower operational risk and complexity
• Standardized KPIs and metrics to measure success
• Built in feedback loops and continuous improvement
• Copying parts of past plays to build new plays.

Private Equity

The playbook concept has also entered into the Private Equity (PE) industry where it is used in a similar way across investments and add-on acquisitions. For example, a PE can invest in companies with a “drop and pop” rationale and excel in taking companies from different industries to a global market with that play. Playbooks in PE companies have also provided benefits in gathering generic approaches and practices that are not full M&A plays but are valid strategies across all plays, investments and add-on acquisitions, e.g.:

• Commercial Due Diligence
• IT Due Diligence and Roadmap
• Strategy alignment with portfolio company leadership
• Evaluation of portfolio leadership and organization
• Value creation execution, methods and tools
• Finance, Tax, Treasury
• Legal, IP and Insurance
• Sales & Marketing

A playbook is more than a work plan based on checklists from previous projects. It is a customized M&A methodology with tools and templates that fit the corporate or PE business scope, focusing on what is important for that particular deal rationale. It is a way to move away from a deal-by-deal and throw-away approach towards a structured way of working with continuous improvement across all deals.

Example

An example is a playbook for a professional services company that grows by buying smaller competitors and uses economies of scale and market reach to improve the target’s margins. Key is to ensure that none of target’s leadership or employees leave because of the acquisition and that they adopt the buyer’s more effective way of working and risk management, while keeping up sales. In this example, common tools, structure, and methodology are implemented for each deal to meet the challenges. An integration management office is setup with predefined roles and activities by work stream, and tools and templates are modified and implemented for the given integration.  Lastly, synergies are tracked in a consistent manner to compare with other acquisitions and to provide a mechanism to steer decisions of the integration.

Summary

In summary, serial acquirers and dealmakers can benefit from capturing their plays in a playbook and continuously refine them. A playbook can be used in all phases; deal sourcing, due diligence, transaction, value creation and integration. It can exist as a physical book, or be part of an integrated in a cloud-based toolset. If you’d like to learn more about playbooks and their use in your next acquisition or separation, contact our team at Global PMI Partners.

About Global PMI Partners

Global PMI Partners is the only global consultancy firm focused exclusively on merger integration and carve-out services. With offices across the US, Europe and Asia, Global PMI supports both private equity as well as corporate acquirers.